Success in Public Private Partnerships

Success in Public Private Partnerships

The creation of a public private partnership is a complicated transaction. It is complicated because the nature of the parties to the transaction are not the same. The parties are united by a goal, but neither party usually fully understands the others motivations.

The Public sector has a natural distrust of the Private sector. There is an assumption that the profit motive naturally creates a degree corruption. The Public sector employees assume that the private sector lacks values and limitations. There is a general lack of respect.

"Neither side has a true viewpoint of the other side. Hence every Public Private venture starts out coldly. It is not like a marriage."

The Private sector is generally just as skeptical about the Public sector. Why would anyone work for the government if they are talented enough to be hired by big business? The Private sector naturally has a viewpoint the Public sector is lazy and lacking of talent and foresight.

Neither side has a true viewpoint of the other side. Hence every Public Private venture starts out coldly. It is not like a marriage. There is no courtship. There is usually a union caused by politeness who often have another set of maturation that only lead to further complications. After the agreements are in place, the Public sector usually passes off the execution of these agreements to a staff that really doesn’t want to work with their Private sector counterparts.

Hence most Public Private partnerships are stuck in the mud before they even get started. Most of these agreements fail at the outset because the union lacks the tools that are required for a successful transaction to occur. These ventures lack basic communication. I am not saying there is no talk. There is a lot of talk. There is no real listening. There is no action that takes place from those words. There is no action because there is no mutual respect between the parties.

The written agreement creates a legal obligation but a successful venture requires a mutual respect. The parties need to make an effort to like one another. I once charged someone on my staff, who was caught in a transaction that was stuck in the mud, to learn to like his counterparts. I told him that he needed to cause his counterparts to like him. I told him until he became friend with his counterparts the transaction would go nowhere. He set forth on the task of building that mutual respect. He needed to learn to develop trust.

I think that a critical part of developing trust is having an open book policy. The facts are the facts. A fundamental rule is eliminating all secrets in the venture. You need to respect the concept of an open book policy on all issues. It is not just granting access. It is also explaining what is in the book. A successful venture is an education process. Both sides need to teach one another about their motivations. Both parties need to understand on another’s rules and limitations. Both sides need to eliminate one another’s fears. A friendship needs to be built.

The profit needs to be disclosed. For some reason a lot of Private sector ventures hide the ball when they talk about their profit. The public sector understands there is a profit, so it is critical that the Private sector discloses all of its gains. It is critical they disclose their potential gains.

We try to engage an independent auditor to annually provide a scoreboard that will disclose the progress of our Public Private ventures. If you try to leave anything unsaid it is ultimately understood by your counterparts. Secrets ultimately lead to the breakdown of the relationship and in the case of Public Private partnership it results in neither party achieving their goals.